According to the Bureau of Labor Statistics, U.S. employers added some 678,000 jobs to the job market, representing the most significant gain since July of 2021. But, as the market continues to reorder itself, we’re seeing more Americans trade in their blue collars for an office chair.
With employees at all levels quitting their positions in masses, what can leaders do to sustainably keep their teams intact? Join Executives Unlimited as we review critical insights from the first quarter of 2022.
What The Data Shows
With most trends pointing upwards, the overall unemployment rate declined during the month of March.
Out of all industries, data shows prominent growth in both business and financial services. During March, the professional and business services industry added over 102,000 jobs, with overall employment being 723,000 higher than pre-pandemic levels. During the same period, employment in the financial sector rose by 16,000, with the most significant gains shown through real estate.
Despite these gains, we continue to hear stories about hiring shortages. By looking into the industries currently struggling, we can better understand the situation.
Throughout March, employment in leisure and hospitality remained 8.7% below pre-pandemic levels. However, the industry also held the highest hiring rate—8.1%—compared to the national rate of 4.5%. Why is this important? It tells us that workers have left the industry.
For executives, understanding why employees are quitting in masses is essential.
Using the data above, we can denote that workers are leaving industries—specifically the service industry—to enter others due to pay, stability issues, and health concerns. They aren’t quitting and exiting the workforce; they’re quitting and accepting entry-level positions in offices. And they’re receiving higher pay because of it.
A growing trend worthy of noting is the diversification of the types of work available. For example, we’re seeing an increase in demand for contract or project work as companies operate towards digitizing themselves or revamping their image. The gig economy was alive and well before 2020, but its growth over the last two years introduced greater flexibility into the lives of many. To keep up with the changing expectations of workers, companies will need to adjust their hiring practices to attract and retain the most remarkable talent.
Executives are Increasing Salaries—For Workers and Themselves
Of the many calls for concern that top executives see as their most significant risks for 2022—disrupted global supply chains, ongoing variants, or rising inflation—none rank above retention challenges and talent acquisition concerns, according to a survey conducted by PwC.
To assist in retaining personnel, we’ve seen a growing trend of organizations offering increased salaries or incentives.
Recently, Bank of America CEO Brian Moynihan announced a pool of $1 billion in restricted stock that will be allocated and awarded to employees making less than $500,000, which represents 97% of the company’s labor force. In a similar move, KPMG U.S. chair and CEO Paul Knopp announced that the organization would make an additional $160 million investment towards salary adjustments.
With unemployment rates returning to pre-pandemic levels, executives are also seeing increased compensation for their efforts.
According to an analysis of executive pay conducted by Compensation Advisory Partners (CAP), the median CEO pay increased by over 19% last year. According to CAP, performance-driven components, such as cash bonuses and stock awards, made up the bulk of CEOs’ pay increases. Some of the large paydays also came from sign-on bonuses, such as Walgreens Boot Alliance CEO Rosalind Brewer, who received $24.5 million in stock and cash incentives.
Executives are tasked with navigating their organization towards profit, and their compensation has historically been tied to financial performance. However, a growing trend found in CAP’s analysis shows that a large portion of CEO bonuses are being tied to the company’s environmental, social, and governance impact goals (ESG). For example, of the 50 analyzed, half made substantial changes to bonuses linked to diversity and inclusion targets, up from only 30% two years earlier.
How Executives Can Attract Workers to Their Organizations
Adjusting wages to reflect current prices and inflation, investing in more significant benefits, and rethinking training are all ways to increase your applicant pool quickly, but alone aren’t enough to retain employees.
While throwing money at an issue may help it disappear in the short term, executives will need to implement lasting changes to remain ahead.
Success will require executives to reassess and enhance their company culture rather than see it disappear. With the return of office work, organizations will find it critical to revamp their culture and practices to better fit the current state of the market. To do this, companies can begin by reviewing their time-off policies, improving work-life balance, and other aspects that are often tied to a business’s culture.
Evolving culture will begin at the executive level, with most employees looking for leadership that aligns with their expectations. Adjusting pay will bring them in, but improving work-life balance will encourager them to stay. Companies can set themselves apart by being authentic in their job postings and catering to what employees want in 2022, not 2019. Additionally, as most companies teeter on the hybrid/office work debate and face record turnover, being honest about a position’s future (and past) during the interview stage will prove vital.
For companies across all industries, the great reshuffling of our labor force acts as a pivotal moment filled with vast possibilities and significant challenges. Those able to plan and implement progressive workplace constructs different from decade-old practices will better position themselves for success than those who cannot.
With a growing client roster across the country, Executives Unlimited has years of experience aiding organizations during times of transition by helping them find and recruit lasting executive talent. To better serve our network of clients, Executives Unlimited will continue to monitor this evolving market.